Brief summary of 2020 tax law amendments in Hungary
By Szabolcs Szeles, Senior Partner of HLB Hungary
4 March 2020
Below we have compiled a summary on the most important tax law amendments effective from this year.
VALUE ADDED TAX
Online data reporting obligation, invoice issuing
From 1 July 2020, the data reporting liability (already being in effect from July 2018) at invoice level covers all invoices issued on domestic transactions to VAT taxpayers registered in Hungary, which means that the VAT threshold concerning the reporting obligation (HUF 100,000) no longer applies. According to changes in the law, from 1 July 2020, the online reporting obligation does not only have to be fulfilled for invoices in which the VAT amount charged reaches or exceeds HUF 100,000, both for all invoices issued between domestic taxable persons where VAT is charged and also for invoices in respect of VAT exempt domestic sale of goods and supply of services and domestic reverse charge transactions. Furthermore, all invoices subject to data reporting need to include the first eight digits of the Hungarian VAT taxpayer partner.
As a further change, from 2021, the data reporting obligation will be extended also to invoices issued to non-taxpayers, i.e. practically covering all possible invoices issued. The data reporting on invoices issued to non-taxpayers does not include the name and address of the customer. Data does not have to be provided regarding invoices issued to non-taxpayers regarding transactions with a place of supply in other Member States, and where the taxpayer satisfies its tax payment obligation within the “one-stop-shop” system. The general deadline for issuing the invoices will be reduced from 15 days to 8 days.
Quick fixes – legal harmonization with EU rules
The following changes took effect as of 1 January in light of the amendments in VAT rules on the EU level.
Changes to call-off stock rules
The previous conditions of the call-off stock simplification rule are now more stringent:
• at the time of delivery, the seller has to know the identity and tax number of the potential customer; the seller is not allowed to be settled for VAT purposes in the destination country.
• the fact of the product transfer has to be reported in the EC Sales list, while both the entity transporting the goods and the potential buyer need to keep detailed records on the goods;
• the customer has to call off the goods within 12 months from the date of delivery.
Changes in chain transactions
The intermediate entity in a supply chain can now decide taking part in the supply chain as a vendor, and all that is required for this purpose is to provide the preceding seller in the chain with its tax number issued by the country of departure. Nevertheless, the general assumption becomes effective, i.e. the intermediate party is considered as taking part in the chain as a buyer.
Changes in the conditions of tax-exempt intra-Community supplies
VAT ID number of the buyer becomes an inevitable condition for tax-exempt Community supplies. As a result, an EU supply is tax exempt if the following conditions are met:
• The buyer is a registered taxpayer in the destination country and has a valid tax number in another Member State, and this tax number is revealed to the vendor.
• The vendor has to submit a proper and full EC Sales list. In case of non-compliance, the tax exemption criterion is not fulfilled (exception: if this taxpayer acted in the good faith and provides all necessary data to the tax authorities relating to the proper reporting of this transaction).
VAT rate for commercial accommodation services
The VAT rate for commercial accommodation services decreased significantly to 5% (from 18%).
From 1 January 2020 under certain and strict conditions, it becomes possible to reduce the VAT base by way of self-revision of receivables qualifying as irrecoverable debts (i.e. the tax base reduction needs to be claimed by amending the original tax return filed on the original transaction).
Tax-exempt services related to imports
For certain services directly linked to import transactions, one condition for the tax exemption is that such services are provided directly to the importer.
PERSONAL INCOME TAX
One of the most remarkable elements of the tax law amendments for 2020 is that from 1 July 2020 mothers raising at least four children are entitled to lifelong exemption from personal income tax on their certain types of income.
The corporate tax advance yearly one-off top-up obligation was abolished from July 2019.
DAC 6 Directive
From 1 July 2020, a new reporting obligation on cross-border arrangements will come into force, mandatory exchange of information on cross - border arrangements. VAT, excise tax and contributions are not covered by the reporting obligation. A default penalty of up to HUF 500,000 (roughly EUR 1,600) can be imposed upon failure to comply with the reporting obligation, or in the case of delayed, incorrect, false or incomplete execution thereof. The penalty can be up to HUF 5 million (roughly EUR 15,600) if the obligation is not met by the deadline. The first reporting deadline is 31 August 2020.
SOCIAL SECURITY CONTRIBUTION
From July 2020, a new social security legislation will enter into force. Among other changes, technically, the 4% in-kind health insurance contribution, the 3% in-cash health insurance contribution, the 1.5% labour market contribution and the 10% pension contribution will be merged into one single contribution, into the 18.5% social security contribution from 1 July 2020.
SOCIAL CONTRIBUTION TAX
As of 1 July 2019, the social contribution tax rate was decreased to 17.5%.